Intercommunication

If was to buy the list I would sale contact method that I would use would be contacting them in person, although it would be time consuming and expensive, I would want them to see me and know that I am serious about business. I would be able to directly answer any questions that they might have and it is always good to put a face to someone wanting to do business. Cold calling assumes sales people will be successful If they can reach the right person In an organization. I do not think that cold calling should be used but It Is the only way that some can get through.Cold calling focuses on getting past the middle people. A person who calls Like this tries to let the buyer know why they should make a purchase decision right now. They can create a negative experience. I know that I do not Like when people call me and push me to buy something. Many people are so often hit with advertising messages from TV, newspapers, magazines and it is hard to get their attention. Direct mall can help build relationships between you and whomever you are trying to reach.It is more personal because you can say what you want and have time to put your thoughts together and express whatever it is you need to and is also cost efficient. Most consumers are receptive to direct mail. Yes, I consider sending these contacts unsolicited emails spam. Most of us get spam every day, ranging from a little to a lot, but if you have an e-mail account it is always there. It is frustrating when you open your business email and before you can respond to your customers or email your suppliers, you have spam. I feel that it is just a way for people to try to get you to buy into something, Spam is of no importance to me.

Early Childhood Education Essay

He taonga te reo: Honouring te reo me ona tikanga1, the Maori language and culture, within early childhood education in Aotearoa2. Dr Jenny Ritchie, Associate Professor, Early Childhood Teacher Education, Unitec Institute of Technology, New Zealand Abstract This paper considers data from recent research which illustrates the ways in which tamariki (children), whanau (families) and educators are integrating the use of the Maori language within their everyday educational interactions, as mandated by the bilingual New Zealand early childhood curriculum, Te Whariki (Ministry of Education, 1996). Languages reflect cultures, expressing our deeper meanings and representations. Inscribed within verbal and non-verbal languages are our ways of being, knowing and doing (Martin, 2008). Jeanette Rhedding-Jones has inquired in her Norwegian multicultural context as to â€Å"What kinds of constructions are the monocultural professionals creating for cross-cultural meetings and mergings? † (2001, p. 5). What follows is an exploration of strategies by which Maori ways of being, knowing and doing are being enacted through the medium of te reo in early childhood centres. Introduction Te Whariki (Ministry of Education, 1996), the first bicultural education curriculum in Aotearoa, reaffirmed a commitment already widely acknowledged across the early childhood education sector in this country, to Te Tiriti o Waitangi3, and the validation and inclusion of te reo me ona tikanga4 as an integrated component of early childhood education programmes. Te Whariki contains strong clear statements of expectations for educators in terms of enacting te reo Maori within their teaching: New Zealand is the home of Maori language and culture: curriculum in early childhood settings should promote te reo and nga tikanga Maori, making them visible and affirming their value for children from all cultural backgrounds. Adults working with children should demonstrate an understanding of the different iwi and the meaning of whanau and whanaungatanga5 (Ministry of Education, 1996, p. 42) The juxtaposition of the promotion of te reo and tikanga alongside whanau and whanaungatanga is insightful. Previous research had identified that as early childhood 1 2 Te reo is the Maori language, tikanga are Maori beliefs, values and cultural practices. Aotearoa is a Maori name for New Zealand. 3 Te Tiriti o Waitangi/The Treaty of Waitangi, signed in 1840 between Maori chiefs and the British Crown, promised protections to Maori of their lands and taonga – everything of value to Maori , which includes their languages, beliefs, values and traditions. 4 Te reo is the Maori language and tikanga are Maori cultural practices. This phrase, literally, â€Å"the language and its cultural practices† demonstrates how intrinsically the language and culture are linked. 5 Iwi are tribes, whanau are families, and whanaungatanga is the building of relationships. 2 educators generate an environment reflective and inclusive of Maori values such as whanaungatanga, Maori families are more comfortable and become more involved within that early childhood setting (Ritchie, 2002). Te reo Maori has been severely jeopardised by the processes of colonisation. As Mere Skerrett has written: Maori ways of speaking were also colonised through the subjugation of te reo Maori, to be replaced by English. This, at times violent, process of colonisation caused a disruption in the intergenerational transmission of Maori language, Maori knowledge and, as a consequence, disrupted Maori lives and Maori societies. (2007, p. 7) Whanau Maori have consistently stated their preference that their children learn their language and culture within education contexts (AGB/McNair, 1992; M.Durie, 2001; Else, 1997; Te Puni Kokiri/Ministry of Maori Development, 1998) in affirmation of their identity as Maori, since â€Å"Te reo Maori serves as the medium through which symbolic and cultural components are properly united and Maoriness most appropriately expressed† (A. Durie, 1997, p. 152). Young children learn languages comparatively easily. Early childhood centres are a logical site for young children to have opportunities to learn te reo Maori, in naturalistic experiential ways, consistent with both early childhood and second language learning pedagogies (Cummins, 2001; Ritchie, 1994). This will only occur if we are able to provide them with a linguistically rich environment and authentic language models. It is reasonable that Maori parents might expect that their children will not acquire poor pronunciation of their own language from their educational experiences. Previous Research In 1999 as part of my doctoral research (Ritchie, 2002), I observed 13 different early childhood settings in the Waikato area (Ritchie, 1999). I noted that in most of the settings there was at least one staff member who attempted to use some Maori language. This was a stronger use of te reo than Pam Cubey observed in eight Wellington early childhood centres in 1992, when she reported that virtually no Maori language was heard (Cubey, 1992). During my observations, the most frequent usage of te reo Maori were ‘commands’, such as: â€Å"Haere mai ki te kai; E tu tamariki; E noho; Haere mai ki te whariki; Horoi o ringaringa†6. There were also instances of counting and naming colours in te reo Maori. Several staff repeatedly inserted single Maori nouns within some of their regular English sentences, for example, â€Å"Do you want some fruit? Some panana 6. Haere mai ki te kai – come and eat E tu tamariki – stand up children E noho- sit down Haere mai ki te whariki – come to the mat Horoi o ringaringa – wash your hands panana – banana aporo- apple taringa – ear(s) waha – mouth 3 or some aporo? Turn on your taringa, zip up your waha†. During my visits, eight of the 13 centres sang at least one song in te reo Maori, usually at structured mat-times, which were compulsory for all children. These teachers identified confidence and competence as barriers, because, as one teacher explained, â€Å"you feel like a real twit when it comes out wrong†. I was concerned that the available te reo Maori resources appeared to be under-utilised and that the range of language use was restricted to simple commands, the use of colour names and counting in Maori. This indicated reliance on a limited range of vocabulary, with little knowledge of Maori grammar. Teachers expressed their need for support and encouragement to broaden their ‘comfort zone’ beyond single words, to using complete and more complex phrases that represent linguistically authentic Maori structures. I suggested that teachers consider widening the range of formats in which they used Maori phrases. Recent data Whilst 6. 58% of registered early childhood teachers are Maori (Ministry of Education, 2007), only 1. 6% of New Zealanders of European ancestry speak Maori (Ministry of Social Development, 2007). Early childhood teachers’ use of te reo may seem encouraging in that 75% of Pakeha early childhood teachers said that they use some Maori whilst  teaching, yet 70% of these teachers reported themselves as speaking Maori â€Å"not very well† (Harkess, 2004, p. 12). In 2006 we reported on a two-year study7 with a range of participants, which included early childhood educators, an Iwi Education Initiative8, teacher educators, specialist educators and professional learning providers, co-exploring strategies for supporting the involvement of whanau Maori within early childhood settings other than Kohanga Reo9 (Ritchie & Rau, 2006). Using narrative (Connelly & Clandinin, 1990; Schulz, Schroeder, & Brody, 1997) and Kaupapa Maori (Bishop, 2005; Smith, 1999, 2005) research methodologies, we explored early childhood educators’ strategies for encouraging the participation of whanau Maori within early childhood education settings, and ways for implementing understandings of commitments derived from Te Tiriti o Waitangi as expressed in the bicultural early childhood curriculum, Te Whariki, through the delivery of Tiriti-based programmes10. Participants in this study were those who were strongly committed to implementing Tiriti-based practice. Pedagogical enactment described in this study was consistent with 7 This project was funded through the Teaching Learning Research Initiative, a fund provided by the New Zealand Ministry of Education, and administered by NZCER. 8 We gratefully acknowledge the support and contribution of Kokiri Tuwaretoa Education Initiative to the Whakawhanaungatanga study. 9 Kohanga Reo are Maori-medium educational settings where young children are immersed in the Maori language and culture in a whanau-based context. 10 The term Tiriti-based practice is derived from a commitment to Te Tiriti oWaitangi, the treaty signed in 1840 by Maori chiefs and the British Crown, that legitimated the presence of immigrants, initially from Britain, alongside the tangata whenua, Maori, the indigenous people of this land. 4 a view of Maori language and cultural practices as being holistically and simultaneously performed. This enactment includes daily welcoming and spiritual rituals in te reo, and is inclusive of waiata11. This climate generated a sense of welcoming and safety for Maori families, which resulted in their increasing involvement in centre reo and tikanga implementation. An educator demonstrated how this whanau participation was integral within their early childhood centre programming: â€Å"In partnership with whanau we  introduce new waiata each term, and tikanga experiences, such as, hangi, powhiri, harakeke, [and] legends of the whanau, hapu12, and iwi attending the service. † Other Maori co-researchers within the Whakawhanaungatanga research project also identified aspects of Te Ao Maori13 that they would like to see reflected within early childhood education and care settings. They considered it important that Maori parents and whanau sense a match between their values and those of educational settings. They valued a sense of whanaungatanga generated and enacted within the early childhood centre, whereby tamariki and whanau, kuia and kaumatua, and other whanau members such as â€Å"Aunties† (Martin, 2007) participated as a collective, learning and teaching alongside the teachers and children, educators sharing responsibility and demonstrating willingness to identify and support the needs of all members of that collective. In this vision, te reo Maori is modelled and integrated throughout the programme, with support for adults to increase their own facility with the language alongside their children, and there is ongoing everyday enactment of tikanga such as: rituals of welcoming and farewell; sharing of kai14; a value of inclusiveness; reference to Te Ao Wairua15 and nga Atua16, and annual celebrations such as Matariki. 17 Children, in this view are exposed to te reo as part of the daily enactment of Maori beliefs, values and practices. Co-researchers in this project demonstrated a commitment to integrating te reo and tikanga within their centre practice, in ways that were meaningful and contextual for children and families. Working with natural materials, such as harakeke (flax), provided a source of learning of traditional knowledge, involving the planting and care of the flax bushes, weaving of rourou18, children observing alongside adults, connected to the land and its spiritual significance, as Ana, a Playcentre kaiako, described: So even though we had those harakeke within our centre boundary, in our lawn, we knew that the pa harakeke19 of that harakeke that we had, came 11 12 Waiata are songs. Hangi are feasts cooked in earth ovens, powhiri are greeting ceremonies, harakeke is flax, and hapu are sub-tribes 13 Te Ao Maori is the Maori world. 14 Kai is food 15 Te Ao Wairua is the spiritual dimension. 16 Nga Atua are supernatural beings, or gods. 17 Matariki is the constellation whose arrival announces the Maori New Year. 18 Rourou are flax food baskets. 19 Pa harakeke are flax bushes, often planted as a source of flax for weaving and rongoa (medicinal remedies), and also refers metaphorically to the nurturing by the wider family of the offspring, the younger shoots. 5 from a bigger picture. And all the natural resources on our little wagon inside, in the area of where they go and make pictures and glue things and make structures out of the driftwood and put their shells and tie their shells on and harakeke, they might have been just in the rourou baskets, but we knew and the tamariki knew they come from this bigger picture out there in the whenua20, because they had gone to get them. So we brought our big world reality and our spiritual world reality into the bounds of that centre. Pania, a Maori kindergarten teacher, spoke of her bilingual approach as being like a whariki,21 †¦where you get two strands and you build them together to make your little kete22 or your whariki of learning. And [implementing a bilingual approach] is a way that I can facilitate my programme that is non-threatening. It’s an option for the child – and the parent – whether they would like to do it, but it’s also another teaching technique and a resource and a learning strategy. Daisy, a Pakeha kindergarten teacher, actively researched aspects of tikanga that she was interested in integrating into her teaching: I wrote a story and what I wanted to do was encompass the tikanga aspects on collecting kai moana23. I wanted it to be something Pakeha could grasp, something simple, that was really clear and conveying the tikanga aspects because it’s not just about going down to the beach and picking up a few pipis24, its deeper than that, there’s a lot of kaupapa25 behind it. How did I know about all the tikanga? —I’ve never gone out collecting kai moana in my life? Research, korero26 with others more knowledgeable. As far as getting it to children it needs to be simple and straight-forward. The pipi story is focused on Tangaroa,27 the protocols around that. The tamariki seem to enjoy it, but in order to deepen their understanding, and extend the story, I set up the pipi hunt in the sandpit. So the story was a visual and a listening experience, whereas the pipi hunt was a tactile experience, so that then I think I would have managed to tap into every child’s way of learning. Daisy also involved whanau Maori of her centre in her planning, although she took primary responsibility for researching the reo and tikanga that was to be incorporated. Incorporating te reo and tikanga was more effective when educators were committed both individually and collectively to proactively integrating this within planning, teaching 20 Whenua is land. Whariki are woven flax mats. 22 A kete is a woven flax basket. 23 Kai moana are seafoods. 24 Pipi are cockles. 25 Kaupapa is philosophy. 26 Korero is talking. 27 Tangaroa is the Atua, supernatural being, or God, of the sea. 21 6 interactions, programme evaluation, and centre review. Many of the Pakeha coresearchers have worked hard over the years to increase their competence in te reo, and continue to do so, by taking courses. At Ariel’s childcare centre, all the teachers had attended a reo course offered in their local community. Penny, a kindergarten head teacher who was also studying te reo, explained that as her own confidence grew, and supported by her co-teacher, the quality of te reo within the centre programme continued to strengthen, as â€Å"the reo is fed in gently and quietly†. Respondents from the Hei Ara Kokiri Tuwaretoa Education Initiative data articulated aspirations for early childhood education services that envisioned all children as being supported to become biculturally and bilingually competent. The following example recognises the important role of early childhood services in offering quality models of te reo Maori: To be fully bicultural and therefore bilingual all children in Aotearoa/NZ should have the opportunity to learn to be fluent in Maori and English and develop understanding of both cultures’ world view. We need proficient Maori speaking teachers in all ECE learning environments. It is not enough to use Maori language in directives – information – acknowledgment contexts. We need to work towards providing environments where children can use the target language, be completely immersed in te reo Maori. We need to promote environments where the conscientization of language is constructed as normal to prevent dialogue being used by teachers to act on children. Teachers and children need to be using dialogue to work with each other – co-constructing. In order to reflect this, we need to provide environments rich in Maori language. We need proficient speaking Maori teachers! Regurgitating learnt phrases will not provide the opportunities for children to really conscientise their experiences, that is, thinking in Maori. Only a very high level of exposure in Maori will do that. Honouring the indigenous language and culture of this country remains an ongoing challenge for educators, particularly given the legacy of colonialistic arrogance that has limited access for many people, both Maori and non-Maori. Kaupapa Maori models are providing inspirational pedagogical models that honour te reo me ona tikanga (Skerrett, 2007). However, as the numbers of Maori children in education services other than kaupapa Maori remains high, the onus is on educators in these sectors to find strategies to provide Maori children and families with the language that is their birth-right and source of identity as affirmed by Article 30 of the United Nations Convention on the Rights of The Child (1989), which requires that: In those States in which ethnic, religious or linguistic minorities or persons of Indigenous origin exist, a child belonging to such a minority or who is Indigenous shall not be denied the right, in community with other members of his or her group, to enjoy his or her own culture, to profess and practise his or her own religion, or to use his or her own language. 7 Conclusion Maori continue to seek education provision that respects and honours their identity, including the linguistic affirmation of authentic models of te reo Maori (Robertson, Gunn, Lanumata, & Pryor, 2007). As early childhood educators seek to deliver on the expectations outlined in the early childhood curriculum, Te Whariki (Ministry of Education, 1996), there remain many challenges, not the least of which is the lack of linguistic competence in te reo Maori of the vast majority of teachers (Harkess, 2004). Our research indicates that educators who are dedicated to an ongoing journey of reflexive praxis founded in a commitment to social justice and the promise of Tiriti-based partnership are generating early childhood programmes which respectfully reflect the Maori language and culture, and this in turn encourages the participation of whanau Maori in these services. References AGB/McNair. (1992). Survey of Demand for Bilingual and Immersion Education in Maori. A Report to the Ministry of Education. Wellington: AGB/McNair. Bishop, R. (2005). Freeing Ourselves from Neocolonial Domination in Research: A Kaupapa Maori Approach to Creating Knowledge. In N. K. Denzin & Y. S. Lincoln (Eds. ), The Sage Handbook of Qualitative Research (3rd ed. , pp. 109-164). Thousand Oaks, California: Sage. Connelly, F. M., & Clandinin, D. J. (1990). Stories of Experience and Narrative Inquiry. Educational Researcher, 19(5), 2-14. Cubey, P. (1992). Responses to the Treaty of Waitangi in Early Childhood Care and Education. Unpublished M. Ed. Thesis, Victoria University of Wellington, Wellington. Cummins, J. (Ed. ). (2001). Language, Power and Pedagogy: Bilingual Children in the Crossfire. Clevedon: Multilingual Matters. Durie, A. (1997). Te Aka Matua. Keeping a Maori Identity. In P. Te Whaiti, M. McCarthy & A. Durie (Eds. ), Mai i Rangiatea. Maori Wellbeing and Development (pp. 142-162). Auckland: Auckland University Press with Bridget Williams Books. Durie, M. (2001). A Framework for Considering Maori Educational Advancement. Paper presented at the Hui Taumata Matauranga, Turangi/Taupo. Else, A. (1997). Maori Participation & Performance in Education. A Literature Review and Research Programme. Wellington: Ministry of Education. Harkess, C. (2004). Ethnicity in the Early Childhood Education Teacher-led Workforce. Demographic and Statistical Analysis Unit: Ministry of Education. 8 Martin, K. (2007). Making Tracks and Reconceptualising Aboriginal Early Childhood Education: An Aboriginal Australian Perspective. Childrenz Issues, 11(1), 15-20. Martin, K. (2008). Please knock before you enter. Aboriginal regulation of Outsiders and the implications for researchers. Teneriffe: Post Pressed. Ministry of Education. (1996). Te Whariki. He Whariki Matauranga mo nga Mokopuna o Aotearoa: Early Childhood Curriculum. Wellington: Learning Media. Ministry of Education. (2007). Nga Haeata Matauranga. Education 2006/2007. Wellington: Ministry of Education. Annual Report on Maori Ministry of Social Development. (2007). The Social Report. Retrieved 30 July, 2008 from http://www. socialreport. msd. govt. nz/documents/sr07-cultural-identity. pdf Rhedding-Jones, J. (2001). Shifting Ethnicities: ‘Native informants’ and other theories from/for early childhood education. Contemporary Issues in Early Childhood, 2(2), 135156. Ritchie, J. (1994). Literature Review on Pedagogy of Second Language Acquisition in Immersion Early Childhood Care and Education Settings Report to Te Puni Kokiri. Hamilton: University of Waikato. Ritchie, J. (1999). The Use of Te Reo Maori in Early Childhood Centres. Early Education, 20(Winter), 13-21. Ritchie, J. (2002). â€Å"It’s Becoming Part of Their Knowing†: A Study of Bicultural Development in an Early Childhood Teacher Education Setting in Aotearoa/New Zealand. Unpublished PhD thesis, University of Waikato, Hamilton. Ritchie, J. , & Rau, C. (2006). Whakawhanaungatanga. Partnerships in bicultural development in early childhood education. Final Report from the Teaching & Learning Research Initiative Project. Retrieved February 21, 2008, from: http://www. tlri. org. nz/pdfs/9207_finalreport. pdf Robertson, J. , Gunn, T. R. , Lanumata, T. , & Pryor, J. (2007). Parental decision making in relation to the use of Early Childhood Services. Report to the Ministry of Education. Wellington: Roy McKenzie Centre for the Study of Families & Ministry of Education. Schulz, R. , Schroeder, D. , & Brody, C. M. (1997). Collaborative narrative inquiry: fidelity and the ethics of caring in teacher research. Qualitative Studies in Education, 10(4), 473-485. Skerrett, M. (2007). Kia Tu Heipu: Languages frame, focus and colour our worlds. Childrenz Issues, 11(1), 6-14. 9 Smith, L. T. (1999). Decolonizing methodologies. Research and Indigenous Peoples. London and Dunedin: Zed Books Ltd and University of Otago Press. Smith, L. T. (2005). On Tricky Ground: Researching the Native in the Age of Uncertainty. In N. K. Denzin & Y. S. Lincoln (Eds. ), The Sage Handbook of Qualitative Research (3rd ed. , pp. 85-107). Thousand Oaks, California: Sage. Te Puni Kokiri/Ministry of Maori Development. (1998). Making Education Work for Maori. Report on Consultation. Wellington: Te Puni Kokiri/Ministry of Maori Development. United Nations. (1989). United Nations Convention on the Rights of the Child. Retrieved February 21, 2008, from: http://www. cyf. govt. nz/432_442. htm.

A Difficult Child

Despite their parents’ great efforts, these children are difficult to deal with and to bring up. During the years, people’s opinion about children who face challenges in controlling their feelings and behavior has shifted from one point of view to another. On the one hand, the blame was placed on parents – somehow it was their fault that their children misbehave. If parents were more understanding, patient and caring, then their children would be good. This view didn’t make any sense to many parents and even put them to a cul-de-sac, because their parenting worked for one of their children, but not for other. On the other hand, the experts came to believe that difficult children are like this because of their innate makeup, they are simply born with certain traits, and it is not their fault. Irritability, indifference, fussiness or aggressiveness in children is seen as part of their nature, and parents have no choice but to learn to live with such traits in their child. Similar essay: Having Children While Young It goes without saying that, dealing with difficult children isn’t an easy task and changes to positive side require a long time. In fact, the older they grow, the more rebellious they are likely to become, that’s why it’s very important to discern the difficulties in the upbringing of the child at his early age. Moreover, parents relate to their children can make a huge difference in how youngsters feel about themselves and respond to their environment. Therefore, parents should become child’s support and encouragement. Children learn by example, they absorb all the information like sponges and the best way to promote good habits and behavior is by practicing parents by themselves. One more vital point for parents is to be more involved in child’s life, it means that family members should always keep a healthy relationship with the kid and create a comfort level that will enable him find relatives helpful and reassuring. The last, but not less significant aspect is making child responsible for his decisions and choices, there should always be a consequence of every action, good or bad. This will make him responsible for everything he does and will require a good amount of thinking before any action is taken. I’d like to conclude by saying that â€Å"a difficult child† is not an illness or medical diagnosis, difficult children are normal, they can become positive, enthusiastic, perhaps even especially creative individuals if they are well managed when young, as well as treated with most care and love, from parents, family members, relatives, teachers or any other people around them. A Difficult Child Despite their parents’ great efforts, these children are difficult to deal with and to bring up. During the years, people’s opinion about children who face challenges in controlling their feelings and behavior has shifted from one point of view to another. On the one hand, the blame was placed on parents – somehow it was their fault that their children misbehave. If parents were more understanding, patient and caring, then their children would be good. This view didn’t make any sense to many parents and even put them to a cul-de-sac, because their parenting worked for one of their children, but not for other. On the other hand, the experts came to believe that difficult children are like this because of their innate makeup, they are simply born with certain traits, and it is not their fault. Irritability, indifference, fussiness or aggressiveness in children is seen as part of their nature, and parents have no choice but to learn to live with such traits in their child. Similar essay: Having Children While Young It goes without saying that, dealing with difficult children isn’t an easy task and changes to positive side require a long time. In fact, the older they grow, the more rebellious they are likely to become, that’s why it’s very important to discern the difficulties in the upbringing of the child at his early age. Moreover, parents relate to their children can make a huge difference in how youngsters feel about themselves and respond to their environment. Therefore, parents should become child’s support and encouragement. Children learn by example, they absorb all the information like sponges and the best way to promote good habits and behavior is by practicing parents by themselves. One more vital point for parents is to be more involved in child’s life, it means that family members should always keep a healthy relationship with the kid and create a comfort level that will enable him find relatives helpful and reassuring. The last, but not less significant aspect is making child responsible for his decisions and choices, there should always be a consequence of every action, good or bad. This will make him responsible for everything he does and will require a good amount of thinking before any action is taken. I’d like to conclude by saying that â€Å"a difficult child† is not an illness or medical diagnosis, difficult children are normal, they can become positive, enthusiastic, perhaps even especially creative individuals if they are well managed when young, as well as treated with most care and love, from parents, family members, relatives, teachers or any other people around them.

Canadian Monetary and Fiscal Policies Essay Example | Topics and Well Written Essays - 1750 words

Canadian Monetary and Fiscal Policies - Essay Example Despite the challenges that have characterized the West in the recent past, the last two years have not really been a sad affair for Canada. Despite the economic recession that affected most countries across the world, the recovery process in the case of Canada has rather been a positive affair often realized from the economic trend in the country. In these post recession days, Canada has evidenced the highest economic growth rates in the G-7 economic block. Presently, Canada’s fiscal position is certainly the strongest amongst the G-7 countries and this helps to confirm the proper economic policies of the Canadian government in the recent past. The focus of the government in this regard is to ensure that the country remains attractive and economically stable for the purposes of investment and economic realization. The government’s Economic Action Plan, Budget 2011 was designed in a way to enhance and promote the financial strength of the families in Canada, to create a competitive tax system that attracts investment, to promote innovation and to bond the emerging trade relations between Canada and other countries. In any case, it has been realized that most of these policies have actually been realized in the process of economic recovery and the evidence relates to the fact that the country ranks the top in several economic respects across the world. Through the Economic Action Plan, the government has instituted various policies ad measures that have greatly benefited the country and continue to create positive economic impact on the face of the country. Through the plan, the government is committed to encourage the growth of skilled workforce in the economy through apprenticeships and skilled trades which are indeed churning out thousands of skilled works into the Canadian economy. Presently, the government invests over $40 million annually towards the new Apprenticeship Competition Grant (ACG) (Pasma 2012). This is in addition to the Apprentic eship Incentive Grant (AIG) which has been in existence for several years. Through these programs, it is realized that over 20,000 apprentices are rolled into the economy and get certified after the required period. The Canadian economic success has over the last two years largely depended on the country’s ability to export goods to other countries. While most countries in the West are trying to re-strategize and recover from the detrimental effects of the economic recession, the government of Canada’s main preoccupation has always been the need to create the positive and favorable economic climate in order to enhance and improve the balance of trade for the country. In this respect, Canada has an advantage over the rest of the countries owing to the various policies that have always existed and have greatly been advocated by the government in the last two years. For instance, the Canadian financial system is certainly the strongest in the world. The institutions and h ousehold in Canada are also some of the financially stable units in the industrialized world. All these positivities are basically a consequence of the economic orientation which the Canadian government has always pushed for over the decades. Upon the realization of the critical effects of the financial meltdown, the government was at the forefront in enhancing its fiscal measures so as to boost the growth of the economy and create a stronger economy that can easily withstand the strong waves of the economic

Teachers Unions and Education Productivity Functions Essay

Teachers Unions and Education Productivity Functions - Essay Example But even when taking this into account, â€Å"[N]ot only are America's teachers grossly underpaid, but that teaching is simply not a sustainable profession it its current form...teachers routinely work 10-12 hour days that don't end when the dismissal bell rings...46 percent of teachers leave within their first five years. Such high turnover and instability undoubtedly wreaks havoc on public schools and their respective communities, in which teachers play a vital role† (Heller, 2005). Compared to their professional cohort, people with undergraduate degrees who underwent additional certification, teachers are colossally underpaid, and teaching is a more obviously stressful and demanding job than other jobs in the cohort; one study found that even after taking into account benefits, teachers were paid 12% less than other professionals (Martindale, 2009). Conservatives argue that it is only good teachers who are underpaid, but this argument is bizarre. The very reason that many s chools are turning to underqualified teachers, using substitute teachers increasingly, and relaxing standards is because teacher pay doesn't attract qualified professionals: The market has spoken, and it has denied conservative claims that teachers are overpaid (Moore,. Bearing this in mind, microeconomic analysis makes one thing clear: Teachers' unions, despite risks of rent-seeking behavior, do not lead to net micro-economic loss, and are net-beneficial for the economy. This research only extends to union organization for the sake of collective bargaining (i.e. increasing job satisfaction) and does not address union organization as a national, political interest group. It is possible that teachers' unions might push for negative reforms or have a negative impact on the political system. This paper also attempts to avoid discussing wholly subjective issues of the value of education: Instead, microeconomic analysis conducted hopes to demonstrate that teachers' unions do not cause te achers' pay to spiral out of control compared to others in their professional cohort. Admittedly, an analysis of the effects of collective bargaining on known determinants of student achievement (i.e. teacher time) as well as the education production rate (namely, high school graduation rates) is only a preliminary step in determining the overall effect of collective bargaining on student achievement and teacher productivity. The assessment of teacher pay above ignores yet other factors. First: Not all teachers are paid identically. Since schools are funded by property taxes, there can be substantial variation in pay and school quality. Some areas, like the Glenbrooks in Chicago, have such high incomes in the community that the school resembles a private school. Inner city schools, on the other hand, struggle with poorly paid teachers, inadequate resources, etc. (Wise, 2005; Moore, 2000). The reason is simple: State spending went down, so communities were left to fend for themselves . Where did the money go? Prison. â€Å"40 percent of the U.S. prison population is functionally illiterate... From 1980 to 2000, states' expenditures on education went up 32 percent. In that same period of time, states' spending on prisons went up 189 percent† (Moore, 2000, pg. 198). Any analysis of the pay of teachers' unions will have to

Causes and effects related to the success of the phenomenon of video Essay

Causes and effects related to the success of the phenomenon of video games - Essay Example Cause 1 During the course of this discussion we would specifically be looking at the different causes and effects that have contributed to the success of proliferating this culture. A major cause for the expansion of the video game industry in recent times has been the ever mushrooming entertainment industry of US in particular. With the passage of time as the entire entertainment market of the country has undergone diversification novel frontiers have been explored for launching and marketing a product. For the fulfillment of this purpose the gaming industry has proved to be the economic backbone. Fiction based movies that are based on comic book or mythical characters such as Batman, Spiderman, Harry Potter or Hercules before their release launch their video games in order to ensure that the gain accessibility to address the needs and requirements of every market segment. Since children in any form play the most proactive role of determining the success or failure of a product it i s important that their needs are addressed accordingly. (Flew. 113) Effect A concomitant effect of this has been observed in the development of extremely violent behavioral attitudes among children. Many of these games that are based on comic books characters contain intense violent and brutal ways of killing enemies as a result of which they have an overwhelmingly profound effect on the behavioral development of children. In addition to this many of these games also contain highly vituperative and inflammatory language which after developing a habit if playing these games children inherits with utmost ease. Another effect of the video game culture that is also important to mention in this context is that by getting addicted to this culture many people begin to believe in the existence of a fantasized world comprising of all these superheroes none of which exist in reality. Hence video games can also be accused for presenting fantasy in such a realistic way that is becomes more real istic than reality itself. Cause 2 The global gaming industry which is handled primarily by the technological kingpins of United States is also overwhelmingly influenced by the political operations and military affairs that are taking place in the country. We are all well aware about the military turbulence that the United States is currently going through. This is simultaneously reflected and projected in the content and storyline of the games that are prepared by the gaming industry. Many of the games such as Call of Duty, Delta Force and Medal of Honor are based on war missions many of which are based in either Afghanistan, Iraq or in any different country of the world. Even though on a technological scale these games are simply flawless, but they do develop and impose their effects on the members of a society in rather subtle ways. Effect One of such effect has been in the form of developing and incorporating stereotypes in the minds of their people regarding different nations a nd their civilians respectively. For instance, there remains less discussion about the fact that the West has long portrayed Arabs either in the role of nomads or greedy oil sheiks. Similarly, the women belonging to these countries have been characterized either as belly dancers or people who are continuously subdued or oppressed by their husbands. This kind of projection has further cemented in the minds of American people with the

H.W Essay Example | Topics and Well Written Essays - 500 words - 8

H.W - Essay Example At least, security glasses, scientists jacket, long jeans, shut toe shoes, and gloves are obliged when working with particularly risky substances. Business mixtures, trademarked items and so forth should be joined by a part of the Office of Environmental and Occupational Safety if the compound constituents are not promptly identifiable from the name of the item or from the data on the items bundling label. Contaminated Personal Protective Equipment and garments must be discarded or disinfected before expulsion from the assigned work territory. While little spots of sullying may be cleaned in the lab, horribly sullied protective outer layers might need to be discarded as dry risky waste. Quick measures must be accessible to keep the conceivable spread of sullying in the occasion of a little spill of an Particularly perilous substance. Permeable materials and clean up materials ought to be accessible in all research facilities sufficient to hold and clean people and supplies and zones. Any known spills must be held and disinfected at the earliest opportunity. In the occasion of a substantial spill that is past a lab bunches prompt reaction abilities, the accompanying strategies ought to be taken after: Specifically risky substances must be put away in an assigned range and utilized as a part of a way that will minimize the danger of unintentional discharge (e.g., topped firmly, utilization of concoction safe optional regulation, at whatever point conceivable). Lab staff ought to expel chemicals from capacity just as required and return them to capacity when handy. Extra prerequisites for the safe stockpiling of a particular synthetic may be found in the makers directions. At the point when transporting chemicals past the quick the earth, compartments ought to be secured from breakage by utilizing a jug transporter or other compelling regulation. Research centers and rooms

Scrutinise the concept of secession, with comparative reference to at Essay

Scrutinise the concept of secession, with comparative reference to at least two countries - Essay Example (Premdas 1990:12-31) While occupying the intermediate condition as a protected autonomous entity within an extensively decentralized sovereign state, the movement tends to continue to articulate the desire for a separate an independent destiny with these two goals oscillating between moments of satisfied accommodation and periodic bursts of renewed determination for outright secession. In the end, the objective remains constant - exit completely. (Premdas 1990:12-31) Separatism may be conceived broadly as a quest for autonomous survival either within or without a state; secession strictly speaking is a variant of separatism in which the secessionists seek outright separation and independence in a sovereign state. The quest for self-determination by a community within a plural state is often caught up in upheaval. As an act of territorial and political assertion, a secessionist struggle is usually prolonged, punishing, and prohibitively costly. Furthermore, the logic of the self-determination principle in sanctioning the demand of each people for its own state, embedded doctrinally in the nature of the state as it has evolved, has been the source of territorial fragmentation accompanied with mass expulsions and genocide not merely with the claims of the Third World states after WWII but this has been the case since the French Revolution. There have been waves of self-determination drives ever since the inception of the nation-state as aunit of national and international social organization. With the fall of the multi-ethnic great empires run by the Turks, the Hapsburgs, and the Russians, the cultural fragments sought separate destinies in acts of self-determination. Practically the entire globe was under European imperial control where new states after the European model were engrafted willy nilly on ethnically diverse populations. In these territories, self-determination drives for freedom were enacted one

Since ethics and profit are actually not related, what reasons are Essay - 1

Since ethics and profit are actually not related, what reasons are there to apply ethical standards to business at all Is it si - Essay Example For instance, gaining profit out of illicit or prohibited drugs is possible but this does not mean that the entire activity is accepted as a good act within the society. In fact, the term that something is prohibited justifies further that there is no good about it at all. Ethics and profit may not be related because businesses may come up with different strategic moves that at some point may compromise what is considered morally good within the society. Thus, specifically there is a defined concept within the society for the preservation of life and that everyone is expected to do what is good and right. In line with this, there is a need to understand what ethics is all about. What is ethics? Ethics is concerned about the study of what is to be done (Kerridge, Lowe and McPhee 1). In other words it deals with identifying what is right and wrong (Pojman and Fieser 1). The principles or idea of right and wrong are integrated with the world. From the very beginning, humans have already understood what is right for them and everything that will contribute to their survival is good and that what should be done among them. The trial and error process led them to learn and even until today because humans learned a lot from their experiences. Based on these experiences, the idea of what is good and right has remarkably uncovered. ... These rules simply try to protect the lives, rights and privileges of everyone. For example, a government may set a minimum wage program among private organizations or institutions. This is to be applied in order to set equal privileges among business men and their workers. In this way, workers are also ensured to receive what they deserve and exploitation will be out of the line. Some companies may come up with idea to generate more profit and one way of doing so is to cut the budget for those privileges that has been allocated for workers. The main issue in here is the generation of profit of business outside the bound of the social contract. Eventually, under the social contract an employee has the right to receive what is due to him. Thus, ethics may necessary be applicable in this case but there is really a need to apply it in order to emphasize the scope and coverage of the social contract and push every business towards its obligations in its employees and vice versa. . Busine ss is associated with the law Under the social contract, business is associated with the law. There are corresponding laws that business should adhere to. For example, every business should adapt a financial reporting standard. One purpose of it is to declare the right figure a company is making in its business in order to pay the right amount due to the government. It cannot be denied that various companies are trying to come up with different financial reports depending on their usage for the sole purpose of gaining considerable amount of profit, which is actually the bottom line of all. In some other countries, tax avoidance and evasion are prevalent it is because profit maximization has become a must. Tax evasion is a serious offense and it has

The Effectiveness of Various Organizational Functions that Involve the Term Paper

The Effectiveness of Various Organizational Functions that Involve the Controller - Term Paper Example Effective organizational functions make the building blocks of an efficient organization. Different organizations develop different approaches for organizational functioning in order to protect the interests of various stakeholders while leaving managers enough freedom to take managerial decisions and actions. The effectiveness of organizational functions depends on decision-making and on the execution of decisions. The controller or senior financial officer of the organization plays major roles in planning and managing different organizational functions. Their capabilities and efficiency are often reflected in organizational efficiency. Organizational functions that are based on the principle of profitability for all of the organization's stakeholders assure the most effective behavior of enterprises. With the evolution of modern organizational management practices, the owners and different stakeholders of the organization hire professional managers to manage organizational functions. This helps in the development and optimal exploits of organizational functions. This professional controller or senior financial officers strive for most efficient coordination between various organizational functions. Planning and budgeting are essential components of an effective and efficient organizational function, though run incongruence of the planning process, should not interfere with the planning process in the same way planning process should also take care of budgeting and should not pursue unrealistic visions without any consideration of economic feasibility. It has been pointed out by various studies on the relationship between strategic planning and budgeting that a better strategic planning results in reduced budgeting constraints and more efficient organization and in turn reduced budgeting constrain and efficient organization results in better strategic planning.

Implementing a Business Continuity Essay Example for Free

Implementing a Business Continuity Essay In this lab, you implemented a portion of your organization’s BCP. On the basis of the BIA, the organization determined that the internal Active Directory database and the corporate Web site must be recoverable in the event of system failure or natural disaster. To accomplish this, you configured local backups of Active Directory on the existing virtual server using Windows Server Backup. You also configured the organization’s Web servers to host content from a single NFS share, and to back up that NFS share daily using Windows. Lab Assessment Questions Answers 1. What is the purpose of the business impact analysis (BIA)? 2. What is the difference between a disaster recovery plan (DRP) and a business continuity plan (BCP)? 3. What are the commands used in Windows 2012 to mount the NFS share on the Linux server. 4. Is creating redundancy for systems such as Active Directory or Web servers a part of the DRP or the BCP? 5. Why use the mklink command? 2 | Lab #6: Implementing a Business Continuity Plan 6. What role/service is Windows 2012 Server Backup part of? a. Windows Group Policy b. Windows Collaboration Server c. Windows Server Essentials Experience 7. Which Linux file makes a local share available to NFS clients? a. transports b. imports c. fstab d. exports

Older and Wiser Essay Example for Free

Older and Wiser Essay Frank Heberer, the Human Resources Manager of Medignostics, finds it difficult to accept the aging employees of his firm as part of an energetic workforce. According to Heberer, the older employees of the company are not as productive as the young. However, Bertha Weber from the marketing department trusts that the older employees of Medignostics are necessary for the firm. She intercedes on behalf of the aging employees of the firm to point out to Heberer that it is only the older employee who truly knows the kind of products to sell other aged people. As an example, Weber mentions the successful arthritis campaign of Medignostics which was spearheaded by an aging employee – somebody who was expected to certainly know more about arthritis than the young employees. Weber also points out to Heberer that he, being only 45 years of age, cannot be expected to successfully market products for the aged people. Rather, it is only the aging employee who understands the aches and pains of old age that can successfully market health products and services for other aging people. In other words, the aging employee of a health products company, or any other organization for that matter, is best qualified to market products for the aged. Not only does the aging marketer know the kinds of products and services needed by the aged, but he also is aware of the kind of marketing communication that is required to reach out to the aged. The aging employee is actually expected to most perfectly understand the marketing mix for products that are especially made for the aged. This employee is in an excellent position to decide on the prices of products to be sold to the aged. Moreover, he knows where to place the products to sell the aged. Yet another advantage of older employees put forth by Weber is that the aging employee knows the company better than anybody else. Having worked for decades with Medignostics, an aging employee understands well the policies of the firm, in addition to its goals and requirements. After all, the aging employee has spent plenty of years trying to improve upon his productivity and efficiency in the company. So, Weber refers to the â€Å"experience† of the older employee being of special significance to the company, seeing that the older employee is in a better position to take the company forward with his experiences of success and failure at Medignostics. To put it another way, the aging employee knows what works and what does not work at his firm. The young employee, on the other hand, would take his time to realize the basics of the company before he can even think of taking the company forward with his youthful energy that Heberer would like to fill the company with in place of the old employees. Weber believes that the older employees still have a lot to offer Medignostics. The 58-year-old Hausmann who has worked for the firm for 20 years has been seen to consistently improve his performance. He moved up in organizational rank from bookkeeping to account management. Weber would like Heberer to keep Hausmann employed, the reason being that Hausmann and other aging employees continue to have a lot to offer Medignostics. If Hausmann is not productive in his present function at the company, perhaps Weber would suggest that the older employee must be given a new job function to perform. After all, older employees may not only be extremely useful in marketing to all ages – seeing as they have lived through them all – but also in the area of organizational counseling. The wisdom of the older employees may benefit young employees tremendously. Older employees may also be given the chance to select their new job functions where they would be most productive, given that the organization trusts them more than it would trust its new employees. Hence, Weber would like Heberer to trust the fact that the older employee is truly wiser.

Demand of Derivatives Investment in Malaysia

Demand of Derivatives Investment in Malaysia ABSTRACT This research investigates the demand of derivatives investment by Malaysia. On the whole the main purpose of this dissertation is to study, analyse and discuss about the usage of derivatives by Malaysian company or individual resident. The research paper is divided into five chapters. Chapter 1 introduces derivatives and identification of the research problems. Research objectives and questions are given briefly. Chapter 2 provides an overview of the literature reviewed throughout the research. A detailed description by past researchers is presented. The further detail of each derivative contract are summarised. Chapter 3 deals with the work flow of this study. The research methodologies includes research design and procedure, data collection method, and statistical data analyses method. Data collection from secondary data is analysed to form a theoretical framework. Chapter 4 present the analysis and result of research topic. Tables, diagrams, charts are use to illustrates the findings. Finally, Chapter 5 concludes the dissertation with summary all of the chapters. CHAPTER 1 INTRODUCTION Introduction A derivative is a financial instrument that is derived from assets, indexes, events, value or condition (known as the underlying asset). Rather than trading or exchanging the underlying asset itself, derivative traders enter into an agreement to exchange cash or assets over time based on the underlying asset. (David, 2003) From definition taken from International Accounting Standards 39 (IAS39) Financial Instruments Recognition and Measurement, a derivative is a financial instrument whose value changes in response to the change in a specified interest rate, security price, commodity price, foreign exchange rate, index of prices or rate, a credit rating or credit index or similar variable. (IAS, 2009) Forward contracts, futures contracts, options and swaps are the most common types of derivatives. Derivatives are often leveraged, such that a small movement in the underlying value can cause a large difference in the value of the derivative. (Khanna, 2010) Research Problem The research problem of this study is to uncover the derivative investment as a financial instrument for business and gaining capital. The usage of derivatives is getting larger nowadays. However, there is some criticism regarding the derivative in negative aspect as well. Research Objectives The following are the specific objective to achieve under this research To study the factor influence Malaysian to invest in the derivatives investment. To identify the method of reduction in risk under the usage of derivatives. Research Questions Questions that are bound to be answered throughout the research are: Why do investors select derivative investment? How can derivatives instrument be use? What is the types of derivative that are highly demanded in Malaysia? How does reduction in risk achieve by using derivatives instrument? How do traders speculate in order to make profit via derivatives? Scope of Study The scope of study for this research focuses on the derivative instruments. Significance of Study The significance of this study is to give the investors an idea as how the derivative instruments work in the business world. It also a study that helps businessman to reduce their risk and speculator to gain short-term money through derivatives. CHAPTER 2 LITERATURE REVIEW Introduction of Derivatives The first derivatives contract was listed in the year 1865 by the Chicago Board of Trade (CBOT) in USA. Those exchange traded derivatives contracts were called futures contracts. In April 1973, the Chicago Board of Options Exchange (CBOE) was set up for the purpose of options trading. The Standard Poors 500 Index in USA currently is the most popular stock index futures contract in the world. (HSBC Invest Direct, 2010) There are two distinct groups of derivative contracts, which tell apart the way they traded in the market. Over-the-counter (OTC) derivative is a type of financial derivative that negotiated directly between two parties rather than through an exchange centre. The OTC derivative market is the largest market for derivatives, and is unregulated with respect to disclosure of information between the parties. (Essaddam, et al., 2008) Exchange-traded derivative (ETD) is a type of financial derivative that has its transaction traded via specialised derivatives exchanges or other exchanges, such as Bursa, CBOE, Eurex etc. Derivatives exchange act as an intermediary to all related transactions, ETD is usually traded in standardised derivative contracts. (ISDA, 2009) There are few major derivative contracts which consist of forward, future, option and swap contract. Forward Contract A forward contract is a contract negotiated at present that gives the contract holder both the right and full legal obligation to conduct a certain asset transaction at a specific future time, amount, price and other terms. (Schweser, 2002) The party to the forward contract that agrees to buy the financial or physical asset has a long forward position and is called the long. The party to the forward contract that agrees to sell or deliver the asset has a short forward position and is called the short. (David, 2003) For instance, Lam Soon Company signed a contract under which they agree to buy a tonne of crude palm oil (CPO) from their supplier 30 days from now at a price of RM2,500. Lam Soon Company is the long and the supplier is the short. Both parties have removed uncertainty about the price they will pay or receive for the CPO in the future date. If 30 days from now CPO are trading at RM2,580 per tonne, the short (supplier) must deliver the CPO to the long (Lam Soon) in exchange for a RM2,500 payment. If CPO are trading at RM2,420 on the future date, the long must purchase the CPO from the short for RM2,500, the contract price. Forward contract is usually negotiated directly between the two parties, therefore it is an OTC market forward contract. The forward contracts have the advantage of being flexible (the parties design the contract to meet their specific needs). However, Stalla (2000) had concluded that forward contracts have three major disadvantages: They are illiquid. Because the terms of a forward contract are usually designed to meet the specific needs of the contracting parties, it is difficult for either one of them to close out its side of the contract, either by selling it to a third party or by getting the counterparty to cancel the agreement without demanding an excessive buyout price. They have credit risk. Forward contracts usually require neither party to the agreement to post collateral, make any mark-to-market transfers of funds over the life of the contract, or make any margin deposits to give assurance that it will be able fulfil its obligations under the terms of the agreement (although such clauses could be inserted into a forward contract by mutual consent of the parties). Consequently, a typical forward agreement is based on trust, each party to the agreement must trust that its counterparty will perform in the agreed-upon manner. This exposes both contracting parties to the risk that the counterparty might default on its obligation. They are unregulated. No formal body has the responsibility of setting down rules and procedures designed to protect market participants. Generally, the only protection given to parties involved in the OTC forward market is that of contract law. Future Contract A futures contract is a forward contract that has been highly standardised and closely specified. As with a forward contract, a futures contract calls for the exchange of some goods at a future date for cash, with the payment for the goods to occur at the future delivery date. The purchaser of the contract is to receive delivery of the good and pay for it, while the seller of the contract promises to deliver the goods and receive payment. The payment price is determined at the initial time of the contract. (Adhar, 2006) Futures contracts are usually traded on futures exchanges (ETD), rather than in an OTC environment. Hence, futures contracts are unique forms of forward contracts that designed to reduce the disadvantages of forward contracts. The future contracts terms have been standardised so that can be traded in a public marketplace. Due to standardisation, futures contracts are lesser flexible than forward agreements, hut it also makes them more liquid. (Copeland, et al., 2004) According to Schweser (2006) points, in order to safeguard the clearinghouse, which act as the buyer to every seller and the seller to every buyer, the exchange requires traders to post margin and settle their accounts on a daily basis. Before trading, the trader must deposit funds, called margin with their broker (who, in return, will post margin with the clearinghouse). The purpose of margin is to ensure that traders will perform their contractual obligations. There are three types of margin. The first deposit is called the initial margin which had been explained above. Any losses for the day are removed from the traders account and any gains are added to the traders account. If the margin balance in the traders account falls below a certain level (called the maintenance margin), the trader will get a margin call and have to deposit more money (called the variation margin) into the account to bring the account back up to the initial margin level. (Stalla, 2000) For instance, Lam Soon buys a 30 days future contract of CPO at RM2,500 per tonne. The initial margin was RM2,500. The next day the price of CPO plummetsRM50. Therefore Lam Soon has just lost RM50. At the end of the day, the daily settlement process marks Lam Soons margin account to market by taking RM50 out of the account leaving a balance of RM2,450. Now, assume the maintenance margin level is at 70%. If Lam Soons margin balance falls to or below RM1,750, Lam Soon gets a margin call and has to bring their account back up to the initial RM2,500 level. There are several advantages to using forward or futures contracts as a substitute for trading in the spot markets of commodities: (Sorid, n.d) Transaction costs are much lower and liquidity is better in the futures markets than in the spot markets. There is no need to store or insure physical assets if forward or futures contracts are used. Forward and futures contracts may be sold short, as well as bought long. This may not always be possible if one were trading the actual underlying assets themselves. There is a great deal of leverage in forward and futures contracts. A trader can control on a large position with only a small initial deposit. If the futures contract with a value of RM100,000 has an initial margin of RM10,000 then one percent change in the futures price which is RM1,000, would result in a 10 percent change relative to the traders initial costs. Since there is no margin is required with a forward contract, control can be obtained with no money down. There is flexibility, especially with forward contracts, that can be used to create specialized risk/return patterns. Price risk can be accepted or eliminated by using forward or futures contracts without compromising any holdings of an underlying asset. Thus, a jeweller can sell the price risk associated with holding an inventory of gold without actually disturbing the physical inventory itself. This makes it easy to adjust ones financial exposure to commodity markets, even if ones physical exposure must be maintained for business purposes. The primary disadvantage of using futures contracts for speculative trading would involve a great deal of leverage, so that large losses can occur. In effect, holding a futures position with only the margin requirement on deposit in a brokerage account is the same thing as having purchased the underlying asset on margin. Another closely related disadvantage is that futures (but not forward) contracts subject the trader to margin calls to meet daily settlement obligations. This requires participants to have a cash reserve that can be drawn upon to meet these demands for additional cash. (Sorid, n.d) Option Contract According to the Chicago Board Options Exchange (CBOE) 2008, an option is a contract gives the buyer the right, but not the obligation, to buy or sell an underlying asset at a specific price on or before a certain date. The owner of a call option has the right, but not the obligation to purchase the underlying good at a specific price for a specified time period. While the owner of a put option has the right, but not the obligation to sell the underlying good at a specific price for a specified time period. To qualify these rights, the options owner has to pay a premium to the seller of the option for buying the option. (CBOE, 2008) The seller of the option is called an option writer. Options have four possible positions: (CBOE, 2008) Call option buyer Call option writer or seller Put option buyer Put option writer or seller In these contracts, the rights are with the owner of the option. The buyer that pays the premium receives the right to buy or sell the underlying asset on specific time and price. The writer or seller of the option receives payment and obligates to sell or purchase the underlying asset as agreed in the contract of the option owner. (Akmeemana, n.d.) For instance, BAT share is selling at RM50 while its call option is at RM10. The call option can be exercised for RM45 with a life span of 5 months. The exercise price of RM45 is called the options strike price. The RM10 price of the option is called the option s premium. If the option is purchased for RM10, the buyer can purchase the stock from the option seller over the next 5 months for RM45. The seller, or writer of the option gets to keep the RM10 premium no matter what the stock does during this time period. If the option buyer exercises the option, the seller will receive the RM45 strike price and must deliver to the buyer a share of BAT stock. If the price of BAT stock falls to RM45 or below, the buyer are not obliged to exercise the option. Note that the option holders can only exercise their right to act if it is profitable to do so. The option writer, however, has an obligation to act at the request of the option holder. A put option is the same as a call option except the buyer of the put has the right to sell the put writer a share of BAT at any time during the next five months in return for RM45. The owner of the option is the one who decides whether to exercise the option or not. If the option has value, the buyer may either exercise the Option or sell the option to another buyer in the secondary options market. (Tatum, 2010) For short-term investment horizons, options trading can produce lower transaction costs than the outright purchase and sale of the underlying assets themselves. Besides, options can he used to execute some tax strategies. (Skousen, 2006) Swap Contract A swap is an agreement between two or more parties to exchange sets of cash flows over a period in the future. The parties that agree to the swap are known as counterparties. The cash flows that the counterparties make are generally tied to the value of debt instruments or the value of foreign currencies. Therefore, the two basic kinds of swaps are interest rate swaps and currency swaps. (Schweser, 2006) Unlike the highly structured futures and options contracts, swaps are custom tailored to fit the specific needs of the counterparties. The counterparties may select the specific currency amounts that they wish to swap, whereas exchange traded instruments have set values. Similarly, the swap counterparties choose the exact maturity that they need, rather than maturity dates set by the exchange. This flexibility is very important in the swap market, because it allows the counterparties to deal with much longer horizons than can be addressed through exchange-traded instruments. Also, since swaps are not exchange traded, it gives the participants greater privacy, and they escape a great deal of regulation. (Hodgson, 2006) According to Hodgson (2996), the advantages of swap agreements over conventional traded derivatives can be summarised as below: Swaps are highly flexible and can be custom made to fit the requirements of the parties entering into them. The swap market is virtually unregulated, in contrast to the highly regulated futures market. This could change, however, since regulators usually abhor a regulation vacuum and probably will, eventually, seek to bring the market under their protection. The cost of transacting in the swap market is low. Swaps are private transactions between two parties. Often, swaps are off-balance sheet transactions that can be used, for example, to enable a firm to reposition its balance sheet quickly without alerting competitors. The disadvantages of swaps include: Because swaps are agreements, a party who wants to enter into a particular swap must find a counterparty that is willing to take the other side of the swap. Swaps can be illiquid; once entered into, a swap cannot easily be terminated without the consent of the counterparty. Because there are no margin deposits or a clearinghouse that help ensure, or will guarantee, that the agreements will be honoured, the integrity of swaps depends solely upon the financial and moral integrity of the parties that have entered into them. In other words, the swaps have more credit risk than futures contracts. The Demand of Derivatives Based on the statistics of the Bursa Malaysia Derivatives Berhad, the total exchange of derivatives during the year 2009 was up to 6,137,827 contracts. The crude palm oil futures (ETD) is the most liquid future in Malaysia, total of 4,008,882 contracts with average of 334,074 contracts traded monthly during year 2009. (Bursa Malaysia, 2010) Figure 2.1 shows the monthly price traded and the monthly volume of crude palm oil futures (FCPO) traded in Bursa Malaysia from year 1985 until March 2010. The green colour bar represents the price close on the month end was above the open price open on the beginning of the month, while red colour bar indicates the closing price is below the open price. Figure 2.1 indicates that there was less transaction traded during the eighth decade of the 20th century until 2002. The number of FCPO contract traded keep on increasing especially start from year 2002, and is quite popular in recent year, the volume of transaction exceeded 150,000 contracts each month. FCPO is extremely high volume in 2008 because the global oil price is at its peak at USD145 per barrel. FCPO traded at its pinnacle in November 2006 which recorded 360,650 contracts in a month. This showing that the FCPO is high in demand in Malaysia as compare to previous years. Figure 2.2 shows the history chart of FTSE Bursa Malaysia Kuala Lumpur Composite Index Futures (FKLI) traded in Bursa Malaysia from December 1995 until March 2010. There was a high trading volume during the 1997 Asian Financial Crisis due to the high fluctuate of the Kuala Lumpur Composite Index (KLCI). 148,318 future contracts were traded in September 1998. There were at least 40,000 future contracts traded in the following years of 1998. The volume traded increasing rapidly in 2007 as Malaysian economy recovers. KLCI went as high as 1400 points during the last 3 years. 302,321 future contracts were trade in August 2007, which is the highest volume recorded in history. Based on Figure 2.2 trading volume trend, it can be concluded that speculators were heavily involve in trading FKLI in 1997, where the Asian Financial Crisis tragedy occurred and in its peak in 2007 . KLCI fluctuation was elevated during these two event (circled in the chart). For the global market, the market for options developed rapidly in early 80s. The number of option contract sold each day exceeded the daily volume of shares traded on the New York Stock Exchange. According to the Bank for International Settlements, the total OTC derivative outstanding notional amounted to USD605 trillion as of June 2009. Factors That Influence Derivatives Trading Mike Singh (2010) said that trading derivatives will have lesser risk than other trades because investor are not buying into the company or buying the underlying product. Instead, the risk is placed on performance. Due to its low risk factor, investment and commercial banks, end users such as floor traders, corporations, and mutual and hedge funds, are major types of firms that utilize derivatives. A much lower initial investment start up in derivatives trading, derivatives give an edge to those who decline or do not want to invest as much as is required to purchase stock. Derivatives can be a good way to balance ones total portfolio by spreading the risk throughout a variety of investments, rather than putting all eggs into a basket. Besides that, trading derivatives can be a good short term investment. Compared to some stocks and bond, derivatives is an financial instrument that can pay off in a shorter time frame such as days, weeks, or a few months. Stock and bonds are long-term investments and may over the course of many years. As the shorter turnaround time, derivatives can be a good way break into the market and mix short and long-term investments. (Siems, 1997) Numerous resources are available for learning about derivatives trading and many options are available. Hence derivatives are variety and flexibility, this point of view was supported by Mike Singh, 2010. Derivatives can derive profit from changes in equity markets, currency exchange rate, interest rates around the world. It also include the commodities changes in global supply and demand such as precious and industrial metals, agricultural products, and energy products such as petroleum and natural gas. This show that derivatives trading are available on a global scale. Getting involved in the global economy opens international options that may not be available through the traditional stock market. From the points given above, he concluded that there are three reasons for derivatives trading. First, trading derivatives are lesser risk than other trades. Second, trading derivatives are a good short term investment. Third, trading derivatives are variety and flexibility. Hence, derivatives trading may be a good trading option if someone are looking outside of trading traditional stocks and bonds. The International Swaps and Derivatives Association, Inc. (ISDA) announced the results of a survey done on the derivatives usage by the worlds 500 largest companies. According to the survey, 94% of these companies use derivative instruments to hedge and manage their financial risks in business. The foreign exchange derivatives are the most widely used instruments with total 88% of the sample, followed by interest rate derivatives which is 83% and commodity derivatives. There are two benefits which are most widely recognised attributed to derivative instruments, risk management and price discovery. Risk management could be the most vital purpose of the derivatives market. Derivatives also used to mitigate the risk of economic loss arising from changes in the value of the underlying. This activity is known as hedging. Alternatively, derivatives can be used by investors to increase the profit arising if the value of the underlying moves in the direction they expect, bearing extra risk by speculations. (Kuhlman, 2009) Price discovery is the prediction of information about future cash market prices through the futures market. There is a relationship between an assets current (spot) price, its futures contract price, and the price that people expect to prevail on the delivery date. By using the information contained in futures prices today, market observers can form estimates of what the price of a given commodity will be at a certain time in the future. Futures markets serve a social purpose by helping people make better estimates of future prices, so that they can make consumption and investment decisions more wisely. (Sorid, n.d) The derivatives market are broadly classified into three uses: Hedging Speculation Arbitrage Hedging Hedging is a way to enter into transactions that expose the entity to risk and uncertainty that fully or partially offsets one or more of the entitys other risks and uncertainties. (Elliot Elliot, 2005) One reason why companies attempt to hedge these price changes is because they are risks that are peripheral to the central business in which they operate. Hedging also refers to managing risk to an extent that makes it bearable. (Kameel, 2008) Equity Hedging Traders can use derivatives to hedge or mitigate risk in the stock market. Entering into a derivative contract can cover part or all of the losses if the value of their underlying position moves in the opposite direction. For equity forward contracts, where the underlying asset is a single stock, a portfolio of stocks, or a stock index, work in much the same manner as other forward contracts. An investor who wishes to sell 100 shares of BAT stock 90 days from now and wishes to avoid the uncertainty about the stock price on that date, could do so by caking a short position in a forward contract covering 100 BAT shares. A dealer might quote a price of RM48 per share, agreeing to pay RM4,800 for the 100 shares 90 days from now. The contract may be deliverable or settled in cash as described above. The stock seller has locked in the selling price of the shares and will get no more if the price (in 90 days) is actually higher, and will get no less it the price actually lower. (Sharma, 2009) For equity future example, an individual stock trader can minimise the stock trading risk by hedging using futures market (Exchange-traded derivatives). A stock trader is extremely aware of economy downturn. If the trader expected an economy downturn is coming which will cause the share price to drop, the trader can protect against down fall of stocks equity by opening a short position of the FTSE Bursa Malaysia KLCI Futures (FKLI) to hedge against his stock portfolio. So if the economy downturn does happen, the trader will gain profit from the FKLI. However, there will be a loss if the trader close the position of the stock during the economy downturn, but the gain from the FKLI will cover some or over the losses from the stock market. Thus, this can reduce the risk by FKLI futures hedging. (Copeland, et al., 2004) For stock option contracts, one call priced at RM6 with a strike price of RM30 gives the holder the right to purchase 100 shares of the stock at RM30 per share until the exercise date. The contract has a money value of RM600 (RM6 x 100 shares). For put options. the concepts are the same, except that the option gives the holder the right to sell 100 shares of the stated stock at RM30 per share through the exercise date. Commodity Hedging Commodity is a physical substance which there is demand, such as basic resources and agricultural. The most popular commodities in Malaysia include CPO, gold, tin, rubber and latex. (Amadeo, 2003) For instance, an airline company which the fuel is the biggest cost item for an airline taken care of, might want to get protection against the fuel price crisis. The airline company might enter into a future contract to hedge the fuel price. They will sign up a future contract with the fuel supplier (OTC derivative), promising that they will buy a certain amount of fuel at a certain price for the next certain months. The contract will definite the price that the airline company to pay for buying the fuel in future. In case the fuel price go higher than the contract price, then the fuel will have a cheaper price. If the fuel price gone down without the airline company expectation, which mean the contract price is higher than the market price, in that incident, the airline company might not want to exercise the contract price. In return, the airline company need to pay certain of fund to the fuel supplier as the contract fee. (Larry, 2005) Malaysian Airline System Berhad (MAS) announced a RM1.34 billion fuel hedge gain in the second quarter ended 30 June 2009. (Francis, 2009) Idris Jala (2009), the Managing Director and Chief Executive Officer of Malaysia Airlines said that he had decided not to unwind the fuel hedges so that the company can remain protected against the volatile fuel prices. MAS had hedged 47% of its fuel requirement at USD103/ bbl WTI for the year ended 2009 from 31 March 2009. Further highlighting the volatility of fuel prices, the fuel price increased 47% since April 2009, those airlines that did not hedge will be affected by the fuel price increasing, said Idris Jala, 2009. While MAS fuel bill increasing in tandem with the fuel price, MAS total fuel bill will be lower as the gains from the fuel hedges will partly offset the higher fuel cost. Foreign exchange (Forex) Hedging In international trading, dealings with forex play a significant role. There will be a significant impact on business decisions and outcomes if got any fluctuations in the forex rate. Many international trade and business dealings are shelved or become unworthy due to significant exchange rate risk embedded in them. Therefore, companies will use forex hedging with forwards, future, option. (Joseph Nathan, 1999) Forex hedging with forwards Forex forward rate is an agreement between two parties (OTC derivatives) to fix the exchange rate for a future transaction. In Malaysia, there are some banks do provide Forward Rate Agreements (FRA) service such as Bank Islam Malaysia, Maybank, EON Bank Group, CIMB Bank Group, HSBC Bank Malaysia, etc. A company simply transfer the risk to the bank when they entering into a FRA with a bank. Of course the bank internally will do some kind of arrangement to manage the risk. (Currencies Direct, 2010) For instance, a Malaysian construction company, Ban Lee Hin Engineering Construction Sdn Bhd just won a contract to build a bridge road in Philippines. The contract is signed for 10,000,000 Peso and would be paid for after the completion of the work. This amount is consistent with Ban Lee Hin minimum revenue of RM750,000 at the exchange rate of RM7.50 per 100 Peso. However, since the exchange rate could fluctuate and end with a possible depreciation of Peso, Ban Lee Hin enters into a forward agreement with Philtrust Bank in Philippines to fix the exchange rate at RM7.50 per 100 Peso. The forward contract is a legal agreement, and therefore constitutes an obligation on both parties. The Philtrust Bank may have to find a counter party for such transaction, either a party who wants to hedge against the appreciation of 10,000,000 Peso expiring at the same time, or a party that wishes to speculate on an increasing the value of Peso. If the Philtrust Bank itself plays the counter party, t hen the risk would be borne by the bank itself. By entering into a forward contract, Ban Lee Hin is guaranteed of an e Demand of Derivatives Investment in Malaysia Demand of Derivatives Investment in Malaysia ABSTRACT This research investigates the demand of derivatives investment by Malaysia. On the whole the main purpose of this dissertation is to study, analyse and discuss about the usage of derivatives by Malaysian company or individual resident. The research paper is divided into five chapters. Chapter 1 introduces derivatives and identification of the research problems. Research objectives and questions are given briefly. Chapter 2 provides an overview of the literature reviewed throughout the research. A detailed description by past researchers is presented. The further detail of each derivative contract are summarised. Chapter 3 deals with the work flow of this study. The research methodologies includes research design and procedure, data collection method, and statistical data analyses method. Data collection from secondary data is analysed to form a theoretical framework. Chapter 4 present the analysis and result of research topic. Tables, diagrams, charts are use to illustrates the findings. Finally, Chapter 5 concludes the dissertation with summary all of the chapters. CHAPTER 1 INTRODUCTION Introduction A derivative is a financial instrument that is derived from assets, indexes, events, value or condition (known as the underlying asset). Rather than trading or exchanging the underlying asset itself, derivative traders enter into an agreement to exchange cash or assets over time based on the underlying asset. (David, 2003) From definition taken from International Accounting Standards 39 (IAS39) Financial Instruments Recognition and Measurement, a derivative is a financial instrument whose value changes in response to the change in a specified interest rate, security price, commodity price, foreign exchange rate, index of prices or rate, a credit rating or credit index or similar variable. (IAS, 2009) Forward contracts, futures contracts, options and swaps are the most common types of derivatives. Derivatives are often leveraged, such that a small movement in the underlying value can cause a large difference in the value of the derivative. (Khanna, 2010) Research Problem The research problem of this study is to uncover the derivative investment as a financial instrument for business and gaining capital. The usage of derivatives is getting larger nowadays. However, there is some criticism regarding the derivative in negative aspect as well. Research Objectives The following are the specific objective to achieve under this research To study the factor influence Malaysian to invest in the derivatives investment. To identify the method of reduction in risk under the usage of derivatives. Research Questions Questions that are bound to be answered throughout the research are: Why do investors select derivative investment? How can derivatives instrument be use? What is the types of derivative that are highly demanded in Malaysia? How does reduction in risk achieve by using derivatives instrument? How do traders speculate in order to make profit via derivatives? Scope of Study The scope of study for this research focuses on the derivative instruments. Significance of Study The significance of this study is to give the investors an idea as how the derivative instruments work in the business world. It also a study that helps businessman to reduce their risk and speculator to gain short-term money through derivatives. CHAPTER 2 LITERATURE REVIEW Introduction of Derivatives The first derivatives contract was listed in the year 1865 by the Chicago Board of Trade (CBOT) in USA. Those exchange traded derivatives contracts were called futures contracts. In April 1973, the Chicago Board of Options Exchange (CBOE) was set up for the purpose of options trading. The Standard Poors 500 Index in USA currently is the most popular stock index futures contract in the world. (HSBC Invest Direct, 2010) There are two distinct groups of derivative contracts, which tell apart the way they traded in the market. Over-the-counter (OTC) derivative is a type of financial derivative that negotiated directly between two parties rather than through an exchange centre. The OTC derivative market is the largest market for derivatives, and is unregulated with respect to disclosure of information between the parties. (Essaddam, et al., 2008) Exchange-traded derivative (ETD) is a type of financial derivative that has its transaction traded via specialised derivatives exchanges or other exchanges, such as Bursa, CBOE, Eurex etc. Derivatives exchange act as an intermediary to all related transactions, ETD is usually traded in standardised derivative contracts. (ISDA, 2009) There are few major derivative contracts which consist of forward, future, option and swap contract. Forward Contract A forward contract is a contract negotiated at present that gives the contract holder both the right and full legal obligation to conduct a certain asset transaction at a specific future time, amount, price and other terms. (Schweser, 2002) The party to the forward contract that agrees to buy the financial or physical asset has a long forward position and is called the long. The party to the forward contract that agrees to sell or deliver the asset has a short forward position and is called the short. (David, 2003) For instance, Lam Soon Company signed a contract under which they agree to buy a tonne of crude palm oil (CPO) from their supplier 30 days from now at a price of RM2,500. Lam Soon Company is the long and the supplier is the short. Both parties have removed uncertainty about the price they will pay or receive for the CPO in the future date. If 30 days from now CPO are trading at RM2,580 per tonne, the short (supplier) must deliver the CPO to the long (Lam Soon) in exchange for a RM2,500 payment. If CPO are trading at RM2,420 on the future date, the long must purchase the CPO from the short for RM2,500, the contract price. Forward contract is usually negotiated directly between the two parties, therefore it is an OTC market forward contract. The forward contracts have the advantage of being flexible (the parties design the contract to meet their specific needs). However, Stalla (2000) had concluded that forward contracts have three major disadvantages: They are illiquid. Because the terms of a forward contract are usually designed to meet the specific needs of the contracting parties, it is difficult for either one of them to close out its side of the contract, either by selling it to a third party or by getting the counterparty to cancel the agreement without demanding an excessive buyout price. They have credit risk. Forward contracts usually require neither party to the agreement to post collateral, make any mark-to-market transfers of funds over the life of the contract, or make any margin deposits to give assurance that it will be able fulfil its obligations under the terms of the agreement (although such clauses could be inserted into a forward contract by mutual consent of the parties). Consequently, a typical forward agreement is based on trust, each party to the agreement must trust that its counterparty will perform in the agreed-upon manner. This exposes both contracting parties to the risk that the counterparty might default on its obligation. They are unregulated. No formal body has the responsibility of setting down rules and procedures designed to protect market participants. Generally, the only protection given to parties involved in the OTC forward market is that of contract law. Future Contract A futures contract is a forward contract that has been highly standardised and closely specified. As with a forward contract, a futures contract calls for the exchange of some goods at a future date for cash, with the payment for the goods to occur at the future delivery date. The purchaser of the contract is to receive delivery of the good and pay for it, while the seller of the contract promises to deliver the goods and receive payment. The payment price is determined at the initial time of the contract. (Adhar, 2006) Futures contracts are usually traded on futures exchanges (ETD), rather than in an OTC environment. Hence, futures contracts are unique forms of forward contracts that designed to reduce the disadvantages of forward contracts. The future contracts terms have been standardised so that can be traded in a public marketplace. Due to standardisation, futures contracts are lesser flexible than forward agreements, hut it also makes them more liquid. (Copeland, et al., 2004) According to Schweser (2006) points, in order to safeguard the clearinghouse, which act as the buyer to every seller and the seller to every buyer, the exchange requires traders to post margin and settle their accounts on a daily basis. Before trading, the trader must deposit funds, called margin with their broker (who, in return, will post margin with the clearinghouse). The purpose of margin is to ensure that traders will perform their contractual obligations. There are three types of margin. The first deposit is called the initial margin which had been explained above. Any losses for the day are removed from the traders account and any gains are added to the traders account. If the margin balance in the traders account falls below a certain level (called the maintenance margin), the trader will get a margin call and have to deposit more money (called the variation margin) into the account to bring the account back up to the initial margin level. (Stalla, 2000) For instance, Lam Soon buys a 30 days future contract of CPO at RM2,500 per tonne. The initial margin was RM2,500. The next day the price of CPO plummetsRM50. Therefore Lam Soon has just lost RM50. At the end of the day, the daily settlement process marks Lam Soons margin account to market by taking RM50 out of the account leaving a balance of RM2,450. Now, assume the maintenance margin level is at 70%. If Lam Soons margin balance falls to or below RM1,750, Lam Soon gets a margin call and has to bring their account back up to the initial RM2,500 level. There are several advantages to using forward or futures contracts as a substitute for trading in the spot markets of commodities: (Sorid, n.d) Transaction costs are much lower and liquidity is better in the futures markets than in the spot markets. There is no need to store or insure physical assets if forward or futures contracts are used. Forward and futures contracts may be sold short, as well as bought long. This may not always be possible if one were trading the actual underlying assets themselves. There is a great deal of leverage in forward and futures contracts. A trader can control on a large position with only a small initial deposit. If the futures contract with a value of RM100,000 has an initial margin of RM10,000 then one percent change in the futures price which is RM1,000, would result in a 10 percent change relative to the traders initial costs. Since there is no margin is required with a forward contract, control can be obtained with no money down. There is flexibility, especially with forward contracts, that can be used to create specialized risk/return patterns. Price risk can be accepted or eliminated by using forward or futures contracts without compromising any holdings of an underlying asset. Thus, a jeweller can sell the price risk associated with holding an inventory of gold without actually disturbing the physical inventory itself. This makes it easy to adjust ones financial exposure to commodity markets, even if ones physical exposure must be maintained for business purposes. The primary disadvantage of using futures contracts for speculative trading would involve a great deal of leverage, so that large losses can occur. In effect, holding a futures position with only the margin requirement on deposit in a brokerage account is the same thing as having purchased the underlying asset on margin. Another closely related disadvantage is that futures (but not forward) contracts subject the trader to margin calls to meet daily settlement obligations. This requires participants to have a cash reserve that can be drawn upon to meet these demands for additional cash. (Sorid, n.d) Option Contract According to the Chicago Board Options Exchange (CBOE) 2008, an option is a contract gives the buyer the right, but not the obligation, to buy or sell an underlying asset at a specific price on or before a certain date. The owner of a call option has the right, but not the obligation to purchase the underlying good at a specific price for a specified time period. While the owner of a put option has the right, but not the obligation to sell the underlying good at a specific price for a specified time period. To qualify these rights, the options owner has to pay a premium to the seller of the option for buying the option. (CBOE, 2008) The seller of the option is called an option writer. Options have four possible positions: (CBOE, 2008) Call option buyer Call option writer or seller Put option buyer Put option writer or seller In these contracts, the rights are with the owner of the option. The buyer that pays the premium receives the right to buy or sell the underlying asset on specific time and price. The writer or seller of the option receives payment and obligates to sell or purchase the underlying asset as agreed in the contract of the option owner. (Akmeemana, n.d.) For instance, BAT share is selling at RM50 while its call option is at RM10. The call option can be exercised for RM45 with a life span of 5 months. The exercise price of RM45 is called the options strike price. The RM10 price of the option is called the option s premium. If the option is purchased for RM10, the buyer can purchase the stock from the option seller over the next 5 months for RM45. The seller, or writer of the option gets to keep the RM10 premium no matter what the stock does during this time period. If the option buyer exercises the option, the seller will receive the RM45 strike price and must deliver to the buyer a share of BAT stock. If the price of BAT stock falls to RM45 or below, the buyer are not obliged to exercise the option. Note that the option holders can only exercise their right to act if it is profitable to do so. The option writer, however, has an obligation to act at the request of the option holder. A put option is the same as a call option except the buyer of the put has the right to sell the put writer a share of BAT at any time during the next five months in return for RM45. The owner of the option is the one who decides whether to exercise the option or not. If the option has value, the buyer may either exercise the Option or sell the option to another buyer in the secondary options market. (Tatum, 2010) For short-term investment horizons, options trading can produce lower transaction costs than the outright purchase and sale of the underlying assets themselves. Besides, options can he used to execute some tax strategies. (Skousen, 2006) Swap Contract A swap is an agreement between two or more parties to exchange sets of cash flows over a period in the future. The parties that agree to the swap are known as counterparties. The cash flows that the counterparties make are generally tied to the value of debt instruments or the value of foreign currencies. Therefore, the two basic kinds of swaps are interest rate swaps and currency swaps. (Schweser, 2006) Unlike the highly structured futures and options contracts, swaps are custom tailored to fit the specific needs of the counterparties. The counterparties may select the specific currency amounts that they wish to swap, whereas exchange traded instruments have set values. Similarly, the swap counterparties choose the exact maturity that they need, rather than maturity dates set by the exchange. This flexibility is very important in the swap market, because it allows the counterparties to deal with much longer horizons than can be addressed through exchange-traded instruments. Also, since swaps are not exchange traded, it gives the participants greater privacy, and they escape a great deal of regulation. (Hodgson, 2006) According to Hodgson (2996), the advantages of swap agreements over conventional traded derivatives can be summarised as below: Swaps are highly flexible and can be custom made to fit the requirements of the parties entering into them. The swap market is virtually unregulated, in contrast to the highly regulated futures market. This could change, however, since regulators usually abhor a regulation vacuum and probably will, eventually, seek to bring the market under their protection. The cost of transacting in the swap market is low. Swaps are private transactions between two parties. Often, swaps are off-balance sheet transactions that can be used, for example, to enable a firm to reposition its balance sheet quickly without alerting competitors. The disadvantages of swaps include: Because swaps are agreements, a party who wants to enter into a particular swap must find a counterparty that is willing to take the other side of the swap. Swaps can be illiquid; once entered into, a swap cannot easily be terminated without the consent of the counterparty. Because there are no margin deposits or a clearinghouse that help ensure, or will guarantee, that the agreements will be honoured, the integrity of swaps depends solely upon the financial and moral integrity of the parties that have entered into them. In other words, the swaps have more credit risk than futures contracts. The Demand of Derivatives Based on the statistics of the Bursa Malaysia Derivatives Berhad, the total exchange of derivatives during the year 2009 was up to 6,137,827 contracts. The crude palm oil futures (ETD) is the most liquid future in Malaysia, total of 4,008,882 contracts with average of 334,074 contracts traded monthly during year 2009. (Bursa Malaysia, 2010) Figure 2.1 shows the monthly price traded and the monthly volume of crude palm oil futures (FCPO) traded in Bursa Malaysia from year 1985 until March 2010. The green colour bar represents the price close on the month end was above the open price open on the beginning of the month, while red colour bar indicates the closing price is below the open price. Figure 2.1 indicates that there was less transaction traded during the eighth decade of the 20th century until 2002. The number of FCPO contract traded keep on increasing especially start from year 2002, and is quite popular in recent year, the volume of transaction exceeded 150,000 contracts each month. FCPO is extremely high volume in 2008 because the global oil price is at its peak at USD145 per barrel. FCPO traded at its pinnacle in November 2006 which recorded 360,650 contracts in a month. This showing that the FCPO is high in demand in Malaysia as compare to previous years. Figure 2.2 shows the history chart of FTSE Bursa Malaysia Kuala Lumpur Composite Index Futures (FKLI) traded in Bursa Malaysia from December 1995 until March 2010. There was a high trading volume during the 1997 Asian Financial Crisis due to the high fluctuate of the Kuala Lumpur Composite Index (KLCI). 148,318 future contracts were traded in September 1998. There were at least 40,000 future contracts traded in the following years of 1998. The volume traded increasing rapidly in 2007 as Malaysian economy recovers. KLCI went as high as 1400 points during the last 3 years. 302,321 future contracts were trade in August 2007, which is the highest volume recorded in history. Based on Figure 2.2 trading volume trend, it can be concluded that speculators were heavily involve in trading FKLI in 1997, where the Asian Financial Crisis tragedy occurred and in its peak in 2007 . KLCI fluctuation was elevated during these two event (circled in the chart). For the global market, the market for options developed rapidly in early 80s. The number of option contract sold each day exceeded the daily volume of shares traded on the New York Stock Exchange. According to the Bank for International Settlements, the total OTC derivative outstanding notional amounted to USD605 trillion as of June 2009. Factors That Influence Derivatives Trading Mike Singh (2010) said that trading derivatives will have lesser risk than other trades because investor are not buying into the company or buying the underlying product. Instead, the risk is placed on performance. Due to its low risk factor, investment and commercial banks, end users such as floor traders, corporations, and mutual and hedge funds, are major types of firms that utilize derivatives. A much lower initial investment start up in derivatives trading, derivatives give an edge to those who decline or do not want to invest as much as is required to purchase stock. Derivatives can be a good way to balance ones total portfolio by spreading the risk throughout a variety of investments, rather than putting all eggs into a basket. Besides that, trading derivatives can be a good short term investment. Compared to some stocks and bond, derivatives is an financial instrument that can pay off in a shorter time frame such as days, weeks, or a few months. Stock and bonds are long-term investments and may over the course of many years. As the shorter turnaround time, derivatives can be a good way break into the market and mix short and long-term investments. (Siems, 1997) Numerous resources are available for learning about derivatives trading and many options are available. Hence derivatives are variety and flexibility, this point of view was supported by Mike Singh, 2010. Derivatives can derive profit from changes in equity markets, currency exchange rate, interest rates around the world. It also include the commodities changes in global supply and demand such as precious and industrial metals, agricultural products, and energy products such as petroleum and natural gas. This show that derivatives trading are available on a global scale. Getting involved in the global economy opens international options that may not be available through the traditional stock market. From the points given above, he concluded that there are three reasons for derivatives trading. First, trading derivatives are lesser risk than other trades. Second, trading derivatives are a good short term investment. Third, trading derivatives are variety and flexibility. Hence, derivatives trading may be a good trading option if someone are looking outside of trading traditional stocks and bonds. The International Swaps and Derivatives Association, Inc. (ISDA) announced the results of a survey done on the derivatives usage by the worlds 500 largest companies. According to the survey, 94% of these companies use derivative instruments to hedge and manage their financial risks in business. The foreign exchange derivatives are the most widely used instruments with total 88% of the sample, followed by interest rate derivatives which is 83% and commodity derivatives. There are two benefits which are most widely recognised attributed to derivative instruments, risk management and price discovery. Risk management could be the most vital purpose of the derivatives market. Derivatives also used to mitigate the risk of economic loss arising from changes in the value of the underlying. This activity is known as hedging. Alternatively, derivatives can be used by investors to increase the profit arising if the value of the underlying moves in the direction they expect, bearing extra risk by speculations. (Kuhlman, 2009) Price discovery is the prediction of information about future cash market prices through the futures market. There is a relationship between an assets current (spot) price, its futures contract price, and the price that people expect to prevail on the delivery date. By using the information contained in futures prices today, market observers can form estimates of what the price of a given commodity will be at a certain time in the future. Futures markets serve a social purpose by helping people make better estimates of future prices, so that they can make consumption and investment decisions more wisely. (Sorid, n.d) The derivatives market are broadly classified into three uses: Hedging Speculation Arbitrage Hedging Hedging is a way to enter into transactions that expose the entity to risk and uncertainty that fully or partially offsets one or more of the entitys other risks and uncertainties. (Elliot Elliot, 2005) One reason why companies attempt to hedge these price changes is because they are risks that are peripheral to the central business in which they operate. Hedging also refers to managing risk to an extent that makes it bearable. (Kameel, 2008) Equity Hedging Traders can use derivatives to hedge or mitigate risk in the stock market. Entering into a derivative contract can cover part or all of the losses if the value of their underlying position moves in the opposite direction. For equity forward contracts, where the underlying asset is a single stock, a portfolio of stocks, or a stock index, work in much the same manner as other forward contracts. An investor who wishes to sell 100 shares of BAT stock 90 days from now and wishes to avoid the uncertainty about the stock price on that date, could do so by caking a short position in a forward contract covering 100 BAT shares. A dealer might quote a price of RM48 per share, agreeing to pay RM4,800 for the 100 shares 90 days from now. The contract may be deliverable or settled in cash as described above. The stock seller has locked in the selling price of the shares and will get no more if the price (in 90 days) is actually higher, and will get no less it the price actually lower. (Sharma, 2009) For equity future example, an individual stock trader can minimise the stock trading risk by hedging using futures market (Exchange-traded derivatives). A stock trader is extremely aware of economy downturn. If the trader expected an economy downturn is coming which will cause the share price to drop, the trader can protect against down fall of stocks equity by opening a short position of the FTSE Bursa Malaysia KLCI Futures (FKLI) to hedge against his stock portfolio. So if the economy downturn does happen, the trader will gain profit from the FKLI. However, there will be a loss if the trader close the position of the stock during the economy downturn, but the gain from the FKLI will cover some or over the losses from the stock market. Thus, this can reduce the risk by FKLI futures hedging. (Copeland, et al., 2004) For stock option contracts, one call priced at RM6 with a strike price of RM30 gives the holder the right to purchase 100 shares of the stock at RM30 per share until the exercise date. The contract has a money value of RM600 (RM6 x 100 shares). For put options. the concepts are the same, except that the option gives the holder the right to sell 100 shares of the stated stock at RM30 per share through the exercise date. Commodity Hedging Commodity is a physical substance which there is demand, such as basic resources and agricultural. The most popular commodities in Malaysia include CPO, gold, tin, rubber and latex. (Amadeo, 2003) For instance, an airline company which the fuel is the biggest cost item for an airline taken care of, might want to get protection against the fuel price crisis. The airline company might enter into a future contract to hedge the fuel price. They will sign up a future contract with the fuel supplier (OTC derivative), promising that they will buy a certain amount of fuel at a certain price for the next certain months. The contract will definite the price that the airline company to pay for buying the fuel in future. In case the fuel price go higher than the contract price, then the fuel will have a cheaper price. If the fuel price gone down without the airline company expectation, which mean the contract price is higher than the market price, in that incident, the airline company might not want to exercise the contract price. In return, the airline company need to pay certain of fund to the fuel supplier as the contract fee. (Larry, 2005) Malaysian Airline System Berhad (MAS) announced a RM1.34 billion fuel hedge gain in the second quarter ended 30 June 2009. (Francis, 2009) Idris Jala (2009), the Managing Director and Chief Executive Officer of Malaysia Airlines said that he had decided not to unwind the fuel hedges so that the company can remain protected against the volatile fuel prices. MAS had hedged 47% of its fuel requirement at USD103/ bbl WTI for the year ended 2009 from 31 March 2009. Further highlighting the volatility of fuel prices, the fuel price increased 47% since April 2009, those airlines that did not hedge will be affected by the fuel price increasing, said Idris Jala, 2009. While MAS fuel bill increasing in tandem with the fuel price, MAS total fuel bill will be lower as the gains from the fuel hedges will partly offset the higher fuel cost. Foreign exchange (Forex) Hedging In international trading, dealings with forex play a significant role. There will be a significant impact on business decisions and outcomes if got any fluctuations in the forex rate. Many international trade and business dealings are shelved or become unworthy due to significant exchange rate risk embedded in them. Therefore, companies will use forex hedging with forwards, future, option. (Joseph Nathan, 1999) Forex hedging with forwards Forex forward rate is an agreement between two parties (OTC derivatives) to fix the exchange rate for a future transaction. In Malaysia, there are some banks do provide Forward Rate Agreements (FRA) service such as Bank Islam Malaysia, Maybank, EON Bank Group, CIMB Bank Group, HSBC Bank Malaysia, etc. A company simply transfer the risk to the bank when they entering into a FRA with a bank. Of course the bank internally will do some kind of arrangement to manage the risk. (Currencies Direct, 2010) For instance, a Malaysian construction company, Ban Lee Hin Engineering Construction Sdn Bhd just won a contract to build a bridge road in Philippines. The contract is signed for 10,000,000 Peso and would be paid for after the completion of the work. This amount is consistent with Ban Lee Hin minimum revenue of RM750,000 at the exchange rate of RM7.50 per 100 Peso. However, since the exchange rate could fluctuate and end with a possible depreciation of Peso, Ban Lee Hin enters into a forward agreement with Philtrust Bank in Philippines to fix the exchange rate at RM7.50 per 100 Peso. The forward contract is a legal agreement, and therefore constitutes an obligation on both parties. The Philtrust Bank may have to find a counter party for such transaction, either a party who wants to hedge against the appreciation of 10,000,000 Peso expiring at the same time, or a party that wishes to speculate on an increasing the value of Peso. If the Philtrust Bank itself plays the counter party, t hen the risk would be borne by the bank itself. By entering into a forward contract, Ban Lee Hin is guaranteed of an e